While STC is computed using the same exponential moving averages as MACD, it adds a novel cycle component to improve accuracy and reliability. It should also be noted that, although STC was developed primarily for fast currency markets , it may be effectively employed across all markets, just like MACD. It can be applied to intraday charts, such as five minutes or one hour charts, as well as daily, weekly, or monthly time frames.
Namely, it can linger in overbought and oversold territory for extended periods of time. For this reason, the indicator is most often used for its intended purpose of following the signal line up and down, and taking profits when the signal line hits the top or bottom. Let's see how it works. While MACD generates its signal when the MACD line crosses with the signal line, the STC indicator generates its buy signal when the signal line turns up from 25 to indicate a bullish reversal is happening and signaling that it is time to go long , or turns down from 75 to indicate a downside reversal is unfolding and so it's time for a short sale.
Notice that STC line generated a buy signal with the pair around MACD did not until the move was well underway. The next signal was a sell signal, generated at approximately The chief takeaway: these moves occurred ahead of the buy and sell signals generated by the MACD. Also notice how many times the STC line resulted in a straight line, signaling an overbought or oversold market.
The STC indicator is a forward-looking, leading indicator , that generates faster, more accurate signals than earlier indicators, such as the MACD because it considers both time cycles and moving averages. Like any chart indicator, the tool is best used with other forms of analysis and its performance will surely vary as market conditions change. Technical Analysis Basic Education. Trading Strategies.
Schaff Trend Cycle — MetaTrader Indicator
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Since the release of all the information about the STC in , it has become one of the widely used indicators in the technical analysis. Probably no one could have given this generation of traders and technical analysts a better intriguing and fascinating gift as Schaff did. The STC indicator is surely a masterstroke of a genius with a wealth of experience in his field. MACD helps to predict price actions but it has some lagging issues because of its slow responsive signal line. It helps to quickly identify the trends long before the MACD indicator is ever able to identify.
The STC indicator also adds a novel cycle component in the calculations as we have seen in the formula.
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It is important to note that notion of cycles is extremely important for the global financial markets. The cycle improves the overall accuracy and reliability of the STC. Moreover, it makes it easy to spot positive and negative tendencies in the market. The Schaff trend cycle indicator tells traders about the prevailing trend in the market, buying and selling, overbought and oversold conditions, and pinpoints entry and exit points.
It uses two thresholds to convey valuable information. The first threshold is at 25 and the second at The crossing above the 25 line indicates an uptrend while the crossing below the 75 line indicates the downtrend. When the indicator lies between the two thresholds, it indicates that the trend is strengthening in either of the two directions. The STC indicator can only turn into a straight line when it is in the territory of the uppermost or lowermost points.
Input parameters
On the other hand, if the straight line is below the 25 line, it indicates oversold market conditions. In both of these conditions, there is a strong possibility of a trend reversal, however, the indicator does not provide an exact timeline. The STC indicator is a straightforward indicator that is useful for the trading of all types of assets and all timeframes.
Technical analysts and experts suggest entering a buying position when the STC goes above the 25 line because of the positive turn. This method is prone to favor longer periods and can allow noise to greatly affect the end result. This indicator was originally developed by Doug Schaff in the s published in Cycle Channel is loosely based on Hurst's nested channels.
Cycle Metatrader Indicator
Basic idea is to identify and highlight the shorter cycles, in the context of higher degree cycles. Some things to note: As you can see the red channel keeps moving with in the bounds of green channel. When green I've been a huge fan of the STC for a long time, but being based on the MACD means its signals often lag by a bar or two especially in fast moving markets. Prices high above the moving average MA or low below it are likely to be remedied in the future by a reverse price movement as stated in an Article by Denis Alajbeg, Zoran Bubas and Dina Vasic published in International Journal of Economics, Commerce and Management Here comes a study to indicate the idea of this article, Price Distance to its Moving Averages TradingView EN.
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